Review just about any public company’s sustainability report and chances are, you won’t see a mention of how sustainability extends to the brand level. With some exceptions like Marks & Spencer, Clorox Green Works or GE, it generally starts and stops at the enterprise. And outside of the occasional cause marketing campaign, brand owners typically regard sustainability as a niche market that doesn’t dovetail with their core brand promises.
Why? Sustainability has historically been about risk mitigation and cost savings; advances in these areas are necessary and admirable, but aren’t often relevant to the general market. Enterprise-led sustainability is often generic by nature, using the same materiality assessments and stakeholder priorities as the competitive set. By contrast, CMOs and brand managers are trained to see opportunities in terms of relevance: alignment with core customer values and the brand promise. And x% energy savings, supply chain engagement, employee volunteer programs, and other behind-the-scenes activities just aren’t relevant to most brand managers. Nor, in many cases, should they be.
Yet chances are, sustainability is more relevant to your brands than you might think. The next horizon for sustainability is shared value: creating competitive advantage and new market opportunities while benefiting society and the environment. And that’s the territory of the brands. It’s time to use sustainability as a lens for innovation, recognizing that there are limits to our current “growth at all costs” mentality and that the brands who survive in the next 20 years are the ones who are fundamentally rethinking their business models today.
It’s time to begin using sustainability as a lens for new products, services and experiences… to stop waiting for the market to magically appear and begin shaping the new world (and market) that is inexorably coming into existence. That means that senior executives need to put less pressure on short-term results and begin charging brand owners with positioning for the future. A 10% bump in sales today means nothing if your brand gets hammered tomorrow by an NGO, or fails to respond to successful competitive activity due to lack of credibility in sustainability that takes years to build.
The solution: Reverse engineering.
We need to change the direction of the conversation. Instead of trying to make behind-the-scenes activities relevant to the market, let’s start with what’s relevant (or will be) in the first place. Sustainability strategy should be developed from the outside in, working collaboratively with brand management. First find the market opportunity – whether it’s immediate or longer-term – and reverse-engineer your strategy to ensure your company will be credible making those claims in the future. As the focus on supply chain shifts into value chains and value networks, brand and customer value become the starting point for any sustainability conversation. Brand-led sustainability shifts generic enterprise-level activities into highly relevant, differentiated opportunities for improved reputation, competitive advantage and new forms of growth.
For longer-term strategy, back-casting is key. How will your category, competition and distribution change over the next 25 years? What is the future of retail and how will that affect manufacturers (aka the Walmart effect)? How will your future customer mix, including Millennials and emerging markets, shift overall demand for sustainable products in your category? How must your brand adapt to compete and lead in this new world? The answers should guide today’s sustainability strategy. What works today will not work in the next decade, so start getting ahead of the curve now.
There are plenty of short-term opportunities to consider that are “reverse-engineered,” starting from the brand and market opportunity and working backwards to inform enterprise-level activities. These could include brand risks (like ingredients, sourcing and packaging) to differentiators (like customer experience). Our research shows that “green” or values-driven buyers are still buying the mainstream non-green brands they know and trust… yet what percentage of your current business might be lost if a viable values-based competitor entered the market today? I’d suggest at least 20%; more if you target younger generations or markets like China and Brazil. You likely don’t need to reposition the brand to hold onto their loyalty; minor tweaks in customer experience could do the trick (see “brand roles” below for more.)
Brand roles for sustainability
Sustainability is not an either-or proposition. We see three roles that it can play within brand positioning and portfolios:
- Behind the scenes: If sustainability is truly not relevant to your current customer, begin building credibility behind the scenes in anticipation of future market opportunity. Walmart might be a good example here. Nike is currently in this camp, but I’d suggest that they’re missing a big opportunity among their Millennial customer base and should be considering the next option…
- Supporting role: Most mainstream brands can choose this option in which sustainability plays a supporting role via avenues like:
- Customer experience (Marks & Spencer)
- Line extensions or new products (Clorox corporate brand uses sustainability in a supporting role, with Green Works being a market-facing proof point in their portfolio)
- Ingredient or initiative brand (P&G’s Future Friendly, GE’s Ecomagination, Home Depot’s Eco Options)
- Customer engagement (P&G’s Everyday Acts campaign, with caveats on credibility)
- Starring role: You can reposition an existing brand (like Brita water filters) to make sustainability a core part of the brand promise. Or create a new brand for your values-based segment (Green Works product brand deploys sustainability in a starring role.)
Bottom line: Sustainability strategy must shift from an enterprise-level, inside-out endeavor. Instead, take an outside-in approach: strategically back into your goals based on market opportunity to enable your brand to compete and lead in tomorrow’s economy.
Next step: Talk to us about our Brand Integration workshop to begin the conversation with your brand teams.